Digital Realty (DLR) Q4 FY25 earnings call: guidance and Q&A

What is the current landscape of hyperscaler bookings conversations, are they looking further out for power, and which campuses are seeing large footprint demand?

Hyperscaler demand is robust and diverse, with customers seeking capacity in Northern Virginia, Charlotte, Atlanta, and Dallas. They are looking further out on the horizon for capacity than before, and the demand is globalizing, with Europe showing increased contribution. The company has seen 7 consecutive quarters where the largest signing is from a different customer.

“I think now we're 7 straight consecutive quarters where our largest signing is from a different hyperscaler or a different customer, excuse me.”

asked by Eric Luebchow · answered by Andrew Power

What does the expectation for inference to scale in 2026 mean for the industry and Digital Realty?

Inference scaling is playing out in both hyperscale and enterprise businesses. Hyperscalers are seeking capacity blocks in cloud zonal markets, with designs mixing air and liquid cooling for cloud and AI in the same buildings. For enterprise, there's a long tail of demand evolving, with increasing interest in AI use cases, contributing to strong 0-1MW and interconnection bookings.

“I can tell you the dialogue on the designs with our customers, the latest evolutions of cloud is a mixup of cloud and AI inside the same exact building.”

asked by Michael Rollins · answered by Andrew Power

What are the implications of hyperscalers' incredible CapEx guidance for Digital Realty's business model, potential bottlenecks, and pricing power?

The demand from hyperscalers is consistent and diverse, with multiple customers seeking capacity. Bottlenecks exist in labor and build costs due to the race to scale infrastructure. Digital Realty focuses on strategic locations where it can add value, leveraging its track record and supply chain to secure attractive rates and returns, which supports pricing power.

“And it's the cost of labor, it's the cost -- it's a cost of -- in our build costs. And listen, we pick our spots to where we think we can add the greatest value to our customers, those hyperscalers in particular.”

asked by Timothy Horan · answered by Andrew Power

How much of the 0-1MW strength is from share gain versus underlying demand, and how are deal sizes evolving with enterprise AI adoption?

The 0-1MW business is unquestionably gaining market share due to strong execution and the ability to deliver high contiguous capacity in mixed density environments. Enterprise clients increasingly value contiguous blocks above 500kW, with emerging conversations around 5MW blocks for inference. The trend is towards larger capacity blocks and increased power density, which is a win for Digital Realty's sales.

“we are unquestionably taking market share with our focus around execution. We started the year saying this is a big part of our go-to-market, and we were successful in that.”

asked by Aryeh Klein · answered by Colin McLean

Are there updated thoughts on building large footprint sites in more remote power-capable markets, and how do efforts to reduce data center impact on electric rates affect reliance on the grid?

Digital Realty continues to focus on cloud zonal markets like Charlotte, Atlanta, and Dallas, which are growing larger (200-400MW sites). The company has not given up on the grid utility source, viewing its investments as stabilizing the grid and providing demand response. While 'behind-the-meter' solutions are considered for bridging duration, the focus remains on clarifying misconceptions about data centers' positive community and environmental impact.

“We've not given up on the grid utility source. And we are thinking -- anything we're thinking about 'behind-the-meter' is some form of bridging of some form of duration and could be various sizes to help the grid as it brings the reinforcement for transmission, for distribution”

asked by John Hodulik · answered by Andrew Power

Given strong re-leasing spreads, what is Digital Realty's capacity and interest in shorter contract durations or higher annual escalators?

The company has been pushing for higher escalators, targeting a minimum of 3% to 4% or CPI-linked, especially given the inflationary environment for infrastructure delivery. For 0-1MW contracts, which are typically shorter-term, there's a recurring opportunity to adjust rates. For larger, long-term contracts, the volume to churn is less frequent, but the company continuously seeks to optimize pricing for the value delivered.

“we've been pushing on the escalators, and it's -- we're living in an inflationary environment. We're working through that, right? And I'm not talking on a national state. I'm talking about data centers are racing to deliver infrastructure, and that is inflationary to our cost base and our operating model.”

asked by Michael Funk · answered by Andrew Power